Key takeaways:

• The VanEck Australian Resources ETF has established itself as the largest exchange-traded fund catering to ASX-listed resource stocks, more than double the size of its nearest rivals

• SPDR’s S&P/ASX 200 Resource Fund and BetaShares’ S&P/ASX 200 Resources Sector ETF share the same top 10 holdings (by weight), with this cohort representing more than 80% of net assets in both funds

• MVR has significantly outperformed its peers since inception and also recorded a modest outperformance over the last 12 months, but QRE comes out on top over the last three and five years

In the last edition of our ETF series, we compared three of the most popular ETFs focusing on Australian real estate. Everyone knows that Australian investors have a soft spot for property, but it also goes without saying that a large cohort also have a love affair for mining and energy stocks.

With no shortage of commodity stocks to choose from on the ASX – this segment accounts for the most individual companies listed on the local market – resource ETFs offer exposure to a diverse basket of players in this space.

Today we’re looking at three resource ETFs in the VanEck Australian Resources ETF (ASX: MVR), the SPDR S&P/ASX 200 Resource Fund (ASX: OZR), and the BetaShares S&P/ASX 200 Resources Sector ETF (ASX: QRE).

Without further ado, here is the lowdown on these funds.

Fund Objective

The VanEck Australian Resources ETF invests in a diversified portfolio of ASX-listed resources securities with the aim of providing investment returns, before management costs, that closely track the returns of the MVIS Australia Resources Index. 

This index is a pure-play Australian sector index designed to capture the performance of the Australian resources sector. 

Meanwhile, the SPDR S&P/ASX 200 Resources Fund seeks to closely track, before fees and expenses, the returns of the S&P/ASX 200 Resources Index, which includes energy stocks, as well as mining and metals shares. 

The fund is designed to capture capital growth arising from potentially favourable economic trends driven by global resources demand.

Shifting our attention to the third fund under the spotlight, BetaShares S&P/ASX 200 Resources Sector ETF, this ETF aims to track the performance of an index, before fees and expenses, comprising the largest ASX-listed companies in the resources sector. QRE is pitched as a fund that offers leverage to growth in emerging markets, and tactical exposure to the local resources sector.

Fund Profiles and Holdings

First admitted to the ASX in October 2013, MVR is now responsible for managing approximately $381.5 million in funds under management (FUM).

By way of comparison, SPDR’s fund, OZR, hit the market a couple years prior in April 2011, but its net assets are smaller, tracking at $149.1 million at last count.

Listing even earlier than its peers, QRE debuted in December 2010, with its funds under management today accounting for $180.6 million.

Looking at July’s trading action for the trio, MVR was the dominant name. The fund recorded a $28.4 million increase in FUM as approximately $32.8 million in funds inflow occurred throughout the month. Across all broker participants there were 2,719 trades in MVR last month.

In the case of OZR, its FUM eked out a modest increase of $1.8 million, despite a net outflow in funds. Throughout July the fund recorded a net outflow of $1.3 million. There were 2,008 trades involving OZR across all broker participants offering access to the ASX.

Trading in QRE was slightly more liquid than the aforementioned name, with 2,259 trades filled in July. That activity resulted in $9.8 million in funds inflow for the month, which ultimately propped up FUM to the tune of $8.9 million.

While each of the funds offer a different level of exposure to various commodity players, the core holdings that represent the highest weight of net assets are nearly identical.

VanEck’s MVR includes a total of 31 holdings, but the top 10 account for 60.77% of the fund’s assets. Companies within the fund must generate at least 50% of their revenue or assets from the local resources sector. 

In addition, the index MVR tracks uses a stringent rules-based methodology focusing on liquidity, with a minimum of 20 holdings, each with a maximum weighting of 8%. 

In contrast, the SPDR S&P/ASX 200 Resources Fund holds 45 different ASX-listed securities, with the top 10 names representing 81.55% of the fund. Holdings must be classified as members of the GICS® resources sector, including those in the energy sector (GICS® Tier 1), as well as the Metals and Mining Industry (GICS® Tier 3).

The third fund, BetaShares’ S&P/ASX 200 Resources Sector ETF, is currently made up of 42 different resource stocks, with the top 10 holdings accounting for 82.93% of funds under management. 

All securities within QRE must belong to sub-industries including steel, aluminium, precious metals, other metals/minerals, oil and gas production, integrated oil, coal, oil refining/marketing, contract drilling, and oilfield services/equipment.

MVR

1. Woodside Energy 8.99%

2. BHP 8.19%

3. Fortescue Metals 6.72%

4. Rio Tinto 6.66%

5. Santos 6.43%

6. Newcrest Mining 5.31%

7. South32 4.97%

8. Pilbara Minerals 4.68%

9. Origin Energy 4.55%

10. Mineral Resources 4.27%

OZR

1. BHP 38.71%

2. Woodside Energy 12.57%

3. Rio Tinto 6.74%

4. Fortescue Metals 6.04%

5. Santos 4.45%

6. Newcrest Mining 3.92%

7. South32 2.96%

8. Pilbara Minerals 2.15%

9. Northern Star Resources 2.09%

10. Mineral Resources 1.92%

QRE

1. BHP 39.74%

2. Woodside Energy 12.88%

3. Rio Tinto 6.91%

4. Fortescue Metals 5.77%

5. Santos 4.32%

6. Newcrest Mining 4.01%

7. South32 3.03%

8. Pilbara Minerals 2.27%

9. Northern Star Resources 2.10%

10. Mineral Resources 1.91%

All holdings above as at August 15, 2023

Performance and Distributions

Since inception, the VanEck Australian Resources ETF has delivered a total return of 10.58% per annum. More recently, the fund’s returns over one, three, and five years are 27.84%, 16.29% p.a., and 12.31% p.a. respectively.

On the other hand, the SPDR S&P/ASX 200 Resource Fund has realised a total return of 3.81% per annum since inception. Its returns over the last one, three, and five years are 26.58%, 17.12%, and 12.29% respectively.

Last but not least, the BetaShares S&P/ASX 200 Resources Sector ETF has achieved a return of 4.26% per annum since its inception back in December, 2010. The fund’s one, three, and five-year returns are 26.22%, 17.57%, and 12.48%.

Each of the fund’s currently pay a biannual distribution to unitholders. Historically, income has played a major role in contributing towards total annual returns.

As one might expect given the nature of the resources cycle, including the various ‘boom and bust’ periods, the amount and timing of distributions will vary from period to period, and there may even be periods where no distributions are made. 

Prospective investors should also remember that past performance is not indicative of future performance, and results do not provide any guarantee that future returns will be of the same magnitude, or that returns will be positive.

Fees

The three funds charge a similar management fee. While VanEck’s MVR fund charges unitholders a fee of 0.35% per annum, SPDR and BetaShares both charge 0.34% per annum for OZR and QRE respectively.

VanEck advises prospective investors that indirect costs and transaction costs for MVR are estimated at 0.00%. On the other hand, SPDR estimates transaction costs of 0.02% per annum of net asset value (NAV) for OZR based on the 12 months to 30 June 2022, while BetaShares estimates transaction costs for QRE are 0.01% per annum of the fund’s NAV. 

Please refer to the relevant Product Disclosure Statements for up-to-date details on costs and expenses, which may be deducted from the funds assets as and when they are incurred. 

Summary

VanEck’s Australian Resources ETF is the largest fund among the trio, with net assets more than double each of its rivals. Whereas the structure and composition of the SPDR S&P/ASX 200 Resource Fund and the BetaShares S&P/ASX 200 Resources Sector ETF are largely the same, and both funds charge the same management cost, MVR still shares a significant overlap in terms of exposure to core holdings.

On a performance basis, the VanEck Australian Resources ETF has significantly outperformed its peers since inception. The fund also topped its peers across the last 12 months. However, MVR has been upstaged by QRE over the last three and five years. Each fund pays a biannual distribution, with said income forming a major component of total returns over recent years.

MVR:

• Tracking: MVIS Australia Resources Index

• Net Assets: $381.5 million

• Top 10 Holdings (weight): 60.77%

• 5-Year Performance (p.a.): 12.31%

• Distributions: Biannual

• Management Fees (p.a.): 0.35%

OZR:

• Tracking: S&P/ASX 200 Resources Index

• Net Assets: $149.1 million

• Top 10 Holdings (weight): 81.55%

• 5-Year Performance (p.a.): 12.29%

• Distributions: Biannual

• Management Fees (p.a.): 0.34%

QRE:

• Tracking: Solactive Australia Resources Sector Index

• Net Assets: $180.6 million

• Top 10 Holdings (weight): 82.93%

• 5-Year Performance (p.a.): 12.48%

• Distributions: Biannual

• Management Fees (p.a.): 0.34%